PRA Regulatory Digest - April 2023

The PRA Regulatory Digest is for people working in the UK financial services industry and highlights key regulatory news and publications delivered for the month.
Published on 02 May 2023

Top news and publications

  • CP7/23 – Regulated fees and levies: Rates proposals 2023/24
  • Critical third parties to the UK financial sector – third party survey

News and speeches

Moderation in all things - speech by Charlotte Gerken

27 April 2023

The Bulk Purchase Annuity (BPA) market is in a period of accelerated growth, and insurers may be tempted to over-indulge in new business in the short run. Charlotte Gerken outlines three areas where we are already seeing this in practice:

  • an expansion of BPA insurer risk appetites;
  • an increased reliance on third party capacity; and
  • greater interconnectivity with the wider financial system.

Insurers will be playing an increasingly important role in providing financial security to millions of annuity policyholders and as investors in the UK real economy. To be successful in both over the medium to long term, insurers’ senior managers need to exercise moderation in the short term. Their decisions today commit them and their successors to pay pensions for many decades to come. Charlotte explains how, working with insurers, the PRA aims to strengthen senior management accountability and enhance market discipline through the implementation of the Solvency UK package.

Moderation in all things - speech by Charlotte Gerken

Cross cutting publications and updates

CP8/23 – Occasional consultation paper – April 2023

27 April 2023

This CP sets out the PRA’s proposals to make minor amendments to a statement of policy and PRA rules. The proposals in this CP would result in minor changes to the:

  • SoP – ‘The PRA’s approach to the publication of Solvency II technical information’ (Appendix 1)
  • Group Supervision Part of the PRA Rulebook (Appendix 2)
  • Glossary of the PRA Rulebook (Appendix 3)
  • Auditors Part of the PRA Rulebook (also Appendix 3)

The changes proposed in this CP would:

  • amend the PRA’s approach to fulfilling its obligation to publish technical information (TI) necessary for the valuation of insurance liabilities for each relevant currency;
  • insert the definition of ‘participating Solvency II undertaking’ in the Group Supervision Part of the PRA Rulebook;
  • update the definition of ‘accounting principles’ in the Glossary of the PRA Rulebook; and
  • correct the reference number of the form used to notify the PRA of an auditor appointment in the Auditors Part of the PRA Rulebook.

The chapters in this CP are relevant to different types of firms, as follows.

  • Chapter 2 – all UK Solvency II firms, including the Society of Lloyd’s and its managing agents, and third-country branches making use of the TI published by the PRA.
  • Chapter 3 – all UK Solvency II firms within the scope of the Group Supervision Part and the Society of Lloyd’s.
  • Chapter 4 – all PRA-authorised firms.
  • Chapter 5 – all PRA-authorised firms.

CP8/23 – Occasional consultation paper – April 2023

CP7/23 – Regulated fees and levies: Rates proposals 2023/24

13 April 2023

This CP sets out proposals for the PRA’s fees for 2023/24. The proposals would make amendments to the Fees Part of the PRA Rulebook (Appendix 1). The proposals include:

  • the fee rates to meet the PRA’s 2023/24 Annual Funding Requirement (AFR);
  • changes to the internal model application fees and the model maintenance fee;
  • updates to Supervisory Statement 3/16 (SS3/16) to include the information provided in Fees 2.9 and 2.10 (Appendix 2);
  • setting out how the PRA intends to distribute a surplus from the 2022/23 AFR (Chapter 3); and
  • the retained penalties for 2022/23 (Chapter 4).

CP7/23 – Regulated fees and levies: Rates proposals 2023/24

Critical third parties to the UK financial sector – third party survey

11 April 2023

In discussion paper (DP) 3/22 – Operational resilience: Critical third parties to the UK financial sector, the Bank of England, the PRA, and the FCA (collectively the ‘supervisory authorities’) sets out potential measures to oversee and strengthen the resilience of services provided by critical third parties (CTPs) to the UK financial sector. 

As part of ongoing work, the supervisory authorities have issued a survey to aid analysis into the costs and benefits of a potential critical third-party regime in the UK. This can be found on the FCA's website.

The survey asks respondents to provide cost estimates for implementing and ensuring ongoing compliance with potential minimum resilience standards along the lines of those set out in DP3/22. Any consultation proposals might differ from the regime described in the DP. The survey asks for the estimated cost of applying the resilience standards and testing requirements to a single service that is provided to clients. The survey includes the option to provide estimates for additional services in later sections.

Responses are requested by 17 May 2023. 

If you have any questions, please contact thirdpartysurvey@fca.org.uk

Critical third parties to the UK financial sector – third party survey

Insurance publications and updates

MA Asset and Liability Information Request

14 April 2023

On Friday 14 April 2023, the PRA released the Matching Adjustment Asset and Liability Information Request for Year End 2022. The Information Request is relevant to all firms with MA approval, or who are seeking to obtain MA approval.

This Information Request aims to gather information which will be used to inform the PRA’s supervision of firms and to complement PRA Policy work, including the assessment of the potential impacts of certain Solvency II Reform proposals on firms.

MA Asset and Liability Information Request

Bank of England Insurance taxonomy CP14/22 Public Working Draft (PWD)

6 April 2023

This PWD of the Bank of England Insurance Taxonomy sets out the technical implementation of the proposals outlined in CP14/22. Documents published in this PWD represent the reporting requirements outlined in the Appendices to Review of Solvency II: Reporting Phase 2

We have provided annotated templates for new templates, revised templates, and templates with in-template changes, along with the data point modelling (DPM) data dictionary to request industry feedback on the proposed data point modelling. Unchanged and deleted templates are not included in the publication. We invite feedback, from firms and software vendors, on the PWD technical artefacts to uktaxonomypwdfeedback@bankofengland.co.uk by Monday 8 May 2023. 

This PWD should not be used for reporting.

Regulatory reporting - insurance sector

Banking publications and updates

FS1/23 – The prudential liquidity framework: Supporting liquid asset usability

3 April 2023

This Feedback Statement (FS) provides a summary of the responses to the Bank and the PRA’s Discussion Paper DP 1/22 The prudential liquidity framework: Supporting liquid asset usability. The global financial crisis of 2007/2008 exposed a number of cases where banks did not hold an adequate quantity of sufficiently liquid assets. In response, the Liquidity Coverage Ratio (LCR) was introduced to promote the short-term resilience of the liquidity risk profile of banks. The LCR requires banks to hold a large enough stock of high quality liquid assets (HQLA) to meet their payment obligations in the case of a severe short-term stress. The Bank also stands ready to use its balance sheet to provide liquidity insurance as appropriate. Taking the two improvements together, banks can draw on significantly more liquidity, in a more reliable and timely manner, than was the case going into the global financial crisis. These changes have played a central role in making the banking system safer.

FS1/23 – The prudential liquidity framework: Supporting liquid asset usability

More information

Bank Underground – a blog for Bank of England staff to share views that challenge – or support – prevailing policy orthodoxies. The views expressed here are those of the authors, and are not necessarily those of the Bank of England or its policy committees.

Bank Overground – the purpose of Bank Overground is to share our internal analysis. Each bite-size post summarises a piece of analysis that support a policy or operational decision.

Explainers – from Interest rates and inflation through to bank failures and financial crises, Explainers uses everyday examples and engaging visuals to bring economics to life.

European and International developments – readers are referred to the following websites: